How does this impact Bullion? http://www.chinadaily.com.cn/china/2010-11/24/content_11599087.htm St. Petersburg, Russia - China and Russia have decided to renounce the US dollar and resort to using their own currencies for bilateral trade, Premier Wen Jiabao and his Russian counterpart Vladimir Putin announced late on Tuesday. Chinese experts said the move reflected closer relations between Beijing and Moscow and is not aimed at challenging the dollar, but to protect their domestic economies. "About trade settlement, we have decided to use our own currencies," Putin said at a joint news conference with Wen in St. Petersburg. The two countries were accustomed to using other currencies, especially the dollar, for bilateral trade. Since the financial crisis, however, high-ranking officials on both sides began to explore other possibilities. The yuan has now started trading against the Russian rouble in the Chinese interbank market, while the renminbi will soon be allowed to trade against the rouble in Russia, Putin said. "That has forged an important step in bilateral trade and it is a result of the consolidated financial systems of world countries," he said. Putin made his remarks after a meeting with Wen. They also officiated at a signing ceremony for 12 documents, including energy cooperation. The documents covered cooperation on aviation, railroad construction, customs, protecting intellectual property, culture and a joint communiqu. Details of the documents have yet to be released. Putin said one of the pacts between the two countries is about the purchase of two nuclear reactors from Russia by China's Tianwan nuclear power plant, the most advanced nuclear power complex in China. Putin has called for boosting sales of natural resources - Russia's main export - to China, but price has proven to be a sticking point. Russian Deputy Prime Minister Igor Sechin, who holds sway over Russia's energy sector, said following a meeting with Chinese representatives that Moscow and Beijing are unlikely to agree on the price of Russian gas supplies to China before the middle of next year. Russia is looking for China to pay prices similar to those Russian gas giant Gazprom charges its European customers, but Beijing wants a discount. The two sides were about $100 per 1,000 cubic meters apart, according to Chinese officials last week. Wen's trip follows Russian President Dmitry Medvedev's three-day visit to China in September, during which he and President Hu Jintao launched a cross-border pipeline linking the world's biggest energy producer with the largest energy consumer. Wen said at the press conference that the partnership between Beijing and Moscow has "reached an unprecedented level" and pledged the two countries will "never become each other's enemy". Over the past year, "our strategic cooperative partnership endured strenuous tests and reached an unprecedented level," Wen said, adding the two nations are now more confident and determined to defend their mutual interests. "China will firmly follow the path of peaceful development and support the renaissance of Russia as a great power," he said. "The modernization of China will not affect other countries' interests, while a solid and strong Sino-Russian relationship is in line with the fundamental interests of both countries." Wen said Beijing is willing to boost cooperation with Moscow in Northeast Asia, Central Asia and the Asia-Pacific region, as well as in major international organizations and on mechanisms in pursuit of a "fair and reasonable new order" in international politics and the economy. Sun Zhuangzhi, a senior researcher in Central Asian studies at the Chinese Academy of Social Sciences, said the new mode of trade settlement between China and Russia follows a global trend after the financial crisis exposed the faults of a dollar-dominated world financial system. Pang Zhongying, who specializes in international politics at Renmin University of China, said the proposal is not challenging the dollar, but aimed at avoiding the risks the dollar represents. Wen arrived in the northern Russian city on Monday evening for a regular meeting between Chinese and Russian heads of government. He left St. Petersburg for Moscow late on Tuesday and is set to meet with Russian President Dmitry Medvedev on Wednesday. Agencies and Zhou Wa contributed to this story.
I don't think there will be an impact on bullion from the currency arrangement. But people should be concerned about the close cooperation between Russia and China and the long term impact on US security.
The one thing this agreement does is further weaken the dollars already tarnished reputation in the global markets.(and I heavily agree with Cloudsweeper about the future ramifications of this agreement) There has been talk for years about getting oil off of the dollar, but it is not nearly as easy as it sounds. I think with other countries in currency wars combined with struggling countries in the E.U. (Spain, Greece, Portugal) the dollar will stay afloat for a little while longer. The future for the dollar is not bright though, with inflation well on the way, (cotton, corn etc) the PMs are going to be stable for a long time. People are slowly waking up from their slumbers. When We go to the store and see food slowly on the rise, when all of Our retail stores are flooded with Chinese garbage......even a blind man can see what`s ahead for Us. The PMs have had intrinsic value since the dawn of man, and I`m a firm believer that somewhere in Our chemical makeup/dna is an unexplained allure for the PMs.
If I might give a contrarian point of view. Russia and China relationship historically has not been one of trust, and this appears to be a marriage of convenience, to force the US basically to play with the dollar as they desire. If they saw a weakness in the other they would definitely take an advantage, such as with the commodities Russia possess. Secondly, when N. Korea shelled S. Korea, the flight wasn't to precious metals if you recall, but to the rising strength of the USD. Many complain about the weakness of the USD, but when it reverses they see their precious metal holdings stagnate. Forecasting the end of the USD at this point is unfounded. The end of the Euro is more likely than the USD, IMO. Yes, if you look at commodities, they have appreciated ( inflationary), but in the overall, there seems to be more of a stable or sometimes decrease of overall price inflation. There is building confidence in the USD overall, and outside of a "Black Swan" event ( outside of reasonable expectations), it should continue. This doesn't mean that PM won't continue to stabilize or increase, except that now more people can't just jump on expecting great gains, but careful contemplation must take place before making changes, and if they appear to be going downward, sell to avoid the loss, as you can rebuy at the bottom. Same with stocks. It is never wrong to take a profit, as extreme events are impossible to predict IMO. I do have a % of my holdings in PM ( probably more than I should if I count my silver coin collections as "bullion"). I think the stores will do gangbusters tomorrow. Jim
I'm with you, DG. The current value of the USD vs Euro and Pound is actually quite strong. It's interesting to read European media outlets... BBC, Der Spiegel, Il Corrierre, Le Monde... all freely available on the internet in English.
I agree. I don't think people realize how far ahead the Fed is compared to other central banks in the field of managing the currency.
I also think the Euro is more likely to collapse before the dollar. The dollar still is the most recognized currency and accepted currency in the world. The Euro hasn't even come to close to this yet in my opinion. So long as the average Joe on the planet still has confidence in the US dollar, it will be the main currency of choice. Next to the US dollar I would take the Swiss Franc.
